Introduction: A Third Straight Day of Losses
Tuesday brought little relief for investors as Indian equity benchmarks ended in the red for the third consecutive session. Both the Sensex and the Nifty 50 saw a sharp decline of over 1 percent, raising the pressing question—are markets undergoing a healthy pullback after a strong run, or are we seeing the beginning of a more prolonged correction?
Sensex and Nifty in Reverse Gear
The BSE Sensex fell by 872.98 points, closing at 81,186.44 after a brief positive start. It hit an intraday low of 81,153.70. Only three stocks out of the 30-share index managed to close in green, while the rest dragged the index lower, with heavy selling in auto, financial, and defence stocks. The NSE Nifty wasn’t spared either—it slipped 261.55 points to end at 24,683.90.
This continued decline has taken the sheen off the recent rally, leaving investors wondering whether the market is simply cooling off or hinting at a deeper concern.
The Weighing Factors: Domestic and Global Pressures
According to Devarsh Vakil, Head of Prime Research at HDFC Securities, the correction stems from a mix of domestic uncertainty and global volatility. Rising Covid-19 cases in Southeast Asia, particularly in Singapore and Hong Kong, have reignited fears of economic disruption. Meanwhile, global bond yields are climbing, particularly in Japan, where a bond sell-off has pushed borrowing costs higher. These developments have unsettled investor sentiment and led to cautious positioning.
Vakil also noted that traders are anxiously watching the India-U.S. trade negotiations, which adds another layer of unpredictability.
Technical Signals: Warning or Pause?
From a technical standpoint, warning lights are beginning to flash. The Nifty has closed below its 5-day exponential moving average (EMA) for the first time since May 8. This may indicate a shift in trader behaviour—from aggressively buying dips to locking in profits.
Support for the Nifty is now seen at 24,494 and 24,378. On the upside, resistance is expected between 24,800 and 24,900. These levels could serve as important pivot points over the next few sessions.
A Bearish Candlestick and What It Could Mean
Analysts at Bajaj Broking pointed out that the Nifty has formed a bearish candlestick with a lower high and lower low, a textbook signal of a potential continuation of the downtrend. They predict the index could enter a consolidation phase, fluctuating between 24,400 and 25,200 in the short term.
This range-bound movement would allow the market to digest recent gains and correct the overbought technical indicators. Importantly, the zone between 24,350 and 24,400 will be critical—this area aligns with the 20-day EMA and the 61.8% Fibonacci retracement of the rally from 23,935 to 25,116.
Conclusion: Correction or Caution?
While the current drop may seem steep, many market watchers view it as a technical correction rather than a panic-driven selloff. With overbought indicators flashing red last week, a temporary pullback might be necessary to restore balance. However, with global cues turning jittery and profit-booking accelerating, the path ahead remains uncertain.
Investors would be wise to keep an eye on key support levels and broader global trends before making directional bets. The coming sessions could determine whether this is just a pause for breath—or the beginning of something deeper.
